When Peers Default: Analyst Forecast Optimism and Informativeness

ABSTRACT This study examines how intra‐industry corporate bond defaults affect analysts' earnings forecasts. Using the first default within an industry as an exogenous shock, we find that analyst forecast optimism declines and forecast informativeness increases. The decline in optimism is stronger for state‐owned firms, firms with higher default risk, and firms with lower disclosure quality, while the informativeness increase is weaker for these firms. These changes also reduce stock price synchronicity, consistent with improved pricing efficiency. Our findings advance research on bond–equity spillovers and analyst behavior, suggesting that tolerating defaults rather than offering implicit guarantees may enhance information efficiency.